MNI BRIEF: China Aug Manufacturing PMI Contracts For 2nd Month

China's Purchasing Managers' Index (PMI) rebounded moderately to 49.4 in August from July's 49.0, although remaining in contractionary territory below 50 for the second consecutive month, as sporadic Covid-19 outbreaks and heatwaves across parts of the country weighted on manufacturing activities, data from the National Bureau of Statistics on Wednesday showed.

The production sub-index remained flat from July at 49.8, while the new order sub-index rose 0.7 percentage points to 49.2, although both remain below the breakeven 50, indicating supply and demand need to be further strengthened, the NBS said. The non-manufacturing PMI decreased by 1.2 points to 52.6, with service activities also declining by 0.9 pps to 51.9. Businesses in accommodation, catering, communication and financial services are above 55.0, with the business volume maintaining rapid growth, according to the NBS.

China's yuan has edged higher in the wake of the data, helped in part by the better-than-expected PMI number, helped further by another stronger-than-expected PBOC fixing. However, the yuan still sits close to the psychologically important 7 level against the U.S. dollar (See MNI: PBOC Seen Tolerating USDCNY Through 7 If Steady Glide).